Final answer:
The major risk factors for a short-term investment portfolio that are relevant to the options provided include both credit risk, which is the default risk on a debt that may arise from a borrower failing to make required payments, and interest rate risk, which is the risk of value decrease due to rising interest rates.
Step-by-step explanation:
The major risk factors for a short-term (ST) investment portfolio include a range of different risks, with some of the most prominent being:
- Market risk: This refers to the possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets.
- Political risk: This involves the risk of loss caused by changes in a country's political structure or policies which affect the investments.
- Credit risk: The risk that a borrower will default on any type of debt by failing to make required payments.
- Interest rate risk: The danger that the value of an investment will decrease as a result of a rise in interest rates.
- Inflation risk: The risk that inflation will undermine the performance of an investment.
- Currency risk: The risk that the value of a currency will fluctuate, which can affect the value of investments denominated in a foreign currency.
- Operational risk: This arises from internal failures such as fraud, technical problems, or human error.
- Legal risk: The risk of loss because of legal actions affecting an investment.
Considering the options given in the question, the most comprehensive answer would be B) Credit risk and interest rate risk, although it is crucial to recognize that all the risks listed can affect a short-term investment portfolio.